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Av. Marques de São Vicente, 230 - Conjunto 1220, Barra Funda - São Paulo, SP - Brazil, 01141-010
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+55 11 2386-7976
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For years, Brazil used fixed profit margins instead of the arm’s length principle that most countries follow. Law 14,596 of 2023 aligned Brazil with OECD guidelines, and the new rules became mandatory on January 1, 2024. Multinational groups with related party transactions in Brazil now need to price and document them under the arm’s length standard.
How did Brazil’s old transfer pricing rules work?
The old rules set predetermined profit margins to limit deductible costs and define minimum taxable profit. They were simple to apply but often did not match how global groups price their intercompany transactions, which created double taxation and disputes.
What changed with the new rules?
- The arm’s length principle became the base of the system
- Companies must perform a comparability analysis of the transaction
- Accepted methods follow OECD logic: comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin, plus other methods when properly justified
- Documentation to support the pricing is required
Which transactions are affected?
Transactions with related parties abroad, such as intercompany services, royalties, loans and sales of goods, and transactions with entities in tax havens or privileged tax regimes.
What should foreign groups do now?
- Review intercompany agreements and pricing policies against the new rules
- Prepare documentation that supports each transaction
- Check how transfer pricing information is reported in the annual corporate tax return (ECF)
- Coordinate with other jurisdictions to reduce the risk of double taxation
Is Brazil now the same as the OECD?
Brazil is not an OECD member, but its new rules follow OECD guidelines, which makes it easier to align a global policy with the Brazilian operation. Details still differ, so local review remains important.
Frequently asked questions
When did the new rules start? They were optional in 2023 and became mandatory on January 1, 2024.
Do the rules apply to small intercompany payments? The principle applies to related party transactions in general. Thresholds and simplified options may exist, so confirm them for your case.
Gescon’s Transfer Pricing team helps multinational groups adapt policies and documentation to Brazilian rules. Contact us for a first assessment.
